What to do with £20K?

[RiverCityFan]

I know that I am in a very fortunate position but I need some advice on how to best invest £20K.
I am mortgage free and have no debts/hp.
I have a personal pension that I have been paying into for over 20yrs but it is now a closed scheme and I am unable to pay in a lump sum or increase my premiums.
I have been paying into my employers pension scheme for 18 months.
Can I start a new private pension with the lump sum or should I see if I can make a lump sum into my employers scheme?
I'll admit, I don't really understand pensions other than to know I need to pay into one!
Any advice gratefully received

Personally I would buy shares.

Or just have it sitting in my bank...

Sorry I am not much help!

If I was happy with my current pension forecast and was mortgage free, I would blow it to be honest.

Whilst 20k is a great amount, it's not life changing as such and most investment return is likely to be minimal and dribby drabby,

But it's big enough to splash out for a big treat be that a holiday, piece of jewellery etc

Premium bonds? Not as risky as shares and possibly wins of more that you'd get in a savings account.

How old are you? Are you likely to want access to that sum prior to age 55? Have you used your ISA allowance for 2018/19 yet?

Stocks & Shares ISA will give you the same underlying growth opportunities as a pension but different tax advantages. And the money isn't tied up until age 55.

We are going to put a chunk of our savings into premium bonds.

ISA

Retire?

Put it in a premium bond

I've just done this with a smaller amount of money and you can win prizes monthly.

I'll just forget about it until I need to use it!

ISA - perhaps one that has a riskier profile

Spend some of it on myself

Depending on how old you are, I'd put it in a lifetime isa that pays out at 60. For every £4K you invest, the government adds a £1k. Good for retirement

Thanks everyone. I am 50 yrs old, basic rate taxpayer. Have enough savings to act as a buffer for emergencies (in premium bonds) but my pension forecast isn't great. Hence my thinking about putting the money into a pension.
I don't have an ISA though. I am risk averse so wary of stocks and shares.

I’d definitely put it in your pension as you will get tax relief and an extras £2500 added to it!

And you will be able to access it at 55

Oops sorry £5000k

But paradoxically the underlying investment in a personal pension is stocks and shares.....

I would put it into an Isa (and add to every year) - and take out when need when a pensioner.

Do you claim any tax credits?
If so then making a payment into a pension will reduce your income for tax credits purposes and result in an additional amount due to you.
This can be quite significant, up to 41% (the income clawback rate) of the gross contribution (ie what you pay into the pension plus the 20% tax relief).
It depends on your particular circumstances and the figures would need to be worked, but it can make a significant difference.
If you don't already claim tax credits it wouldn't work so well even if it reduces your income to an amount at which you can claim, because there is very little of the tax year left for which you would be entitled. If you would be entitled with a £25k income reduction then it would be worth considering delaying the pension investment until after 5 April and making a claim for 19/20.

You mention you are risk adverse, but you existing pension provision will almost certainly be in some form of stocks and shares.

You may also want to consider the impact of Brexit on the stock market 're investing a one off lump sum.

Actually if you don't already claim it probably wouldn't work as your go j to Universal Credit. I don't know anything about that so can't comment.

Do you pay 40% tax..?

DO NOT buy individual shares. It will likely be a very painful experience.

How long can you lock it away for?

You could open a low cost SIPP, pay it into that and buy collective investment vehicles.

How about investment trusts? If you can leave it there a while and want growth ,consider scottish mortgage or similar. Dont foget, if you pay into a SIPP you will also get a tax relief booster..

Well, step one is finding out how adding extra to your employee pension works. Are you already getting the maximum contribution from your employer? (Eg- if they will match up to 5% contributions, but you are currently only contributing 4% then up your contributions each month!).
Once you have found that out, you are better placed to decide what to do. I'd put it in pensions too, probably by opening a new cheap one and paying it in a bit each month to spread the risk over the next year or so.

What LuckyMarmite says. You get 25% added just like that if you put it in a pension. Premium Bonds won’t do that, and lifetime ISAs are only for the under 40s.

I’m no expert on what kind of pension though. I opened a SIPP to supplement my workplace pension, so that’s becoming a nice little pot to draw down when I’m ready. I did it through Hargreaves Lansdown, but there are lots of other places which do them. I’m expecting to withdraw it in chunks rather than buying an annuity.

If you already have two pensions - why do you want a third pension? It’s putting all your eggs into one basket.

You could do other things with the money to make it work for you, not great interest rates but you could do peer to peer lending if you want to take bigger risks, say a quarter of the amount. Open up regular saving accounts to gain 5% interest & drip feed 3-4 accounts

Spend £3k on a holiday

Because you are not happy with how much money is in the pensions and you would like the uplift from the government adding your tax back in?

Truthfully I'd see a financial advisor